Housing crash deniers ???

[Greg R.]

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

[Greg R.]

Quote from @Aaron Gordy:

House prices are sticky and certainly aren't volatile like stock prices. Homeowners who don't have to sell won't sell. As long as they have jobs then they will stay put. 

Life happens. There are a litany of reason why people are forced to sell. Losing a job is only one of the many reasons why people are forced to sell. 

[John Carbone]

Quote from @Greg R.:

Quote from @Carlos Ptriawan:

@James Hamling
@John Carbone
@Matt Kalish
@Michael Wooldridge

Expect a MORE NORMAL real estate market. Anyone expecting a continuation of 20/21 markets, is just plain delusional. 

I am keeping you on ignore setting Joe, so, feel free to distort and mislead all you want.

James, two points. You said that because, first, your market MN is following seasonal adjustment properly. 
Second also, not all market are behaving the same. 

Lets take a look at this three markets:

Abnormal:

nevada https://fred.stlouisfed.org/se...

Starting to be abnormal:
https://fred.stlouisfed.org/se...

Normal market:
MN: https://fred.stlouisfed.org/se...

 Nevada moved to 2017-level inventory. California regressed to late 2019 inventory, but your Minnesota market is doing good, only regressed
to mid-2021 level :) .....

this is why I keep saying everyone is looking at a different lens because everyone has a different experiences.

Greg and my market feel the price reduction and active inventory increasing a lot, your market is good so far. 

Agreed, this is going to vary on location. However, there is also a national (macro) trend that we're starting to see. In some areas it's not currently super obvious, but give it a month or two. In November/ December we'll be seeing more aggressive price dips and there will be little/ no denial that prices are declining across the board. I suspect at that time the discussion will change from "will the market crash" to "how far down will prices go." Very similar to the talks people are having about the stock market right now. 

Talked to a lender today that's at a national mortgage brokers conference in Las Vegas (AIME Fuse.) I'm sure it won't be a surprise to anyone here that the outlook in the lending industry is incredibly grim and optimism is at ground level. They've see rates in the 5s and 6s wipe out a significant amount of their mortgages and all but kill refinances.

Now we have rates in the 7s, and from what I hear they are expecting them to go even higher. We can look at all kinds of different stats and metrics, but the main factor that's going to cripple the market is the debilitating rates. The cash buyers are drying up. Most of the people who sold at the top of the bubble and had duffle bags full of cash have already bought. The investors who have enough cash to avoid financing are a small minority and are not nearly as numerous as would be need to be to keep prices from falling.

 It becomes a game of chicken now, who will flinch first... how long can owners hold for. if they can weather the storm for the next few years they'll survive. If they can't, their only option will be to drop their prices to make a sale or go into foreclosure. 

https://www.google.com/amp/s/f...

Interesting article about how many homes were purchased by investors. This is mostly done by larger institutions, syndicates, Wall Street. I think it was black rock who was the big one buying up subdivisions. All of the fake demand (they only bought because of free fed money) is literally gone now. They are already throwing in the towel on new purchases. Why would they own real estate at these valuations when they can get 4 percent from The fed doing nothing. In a very short period, everything went from portfolio performance to portfolio preservation. Would not be surprised once leases end to see institutions sell the single family homes to meet their margin calls with their financial backers. Since they got in at the beginning of the Covid wave they can sell for 20 percent less and it will still be a great deal to them. meanwhile, those sales will be comps, and despite John Doe’s putting their foot down and not lowering prices to sell, the market doesn’t care and will dictate. sure, you can keep your 3 percent mortgage and low payment, but you are stuck there, and there’s no equity to pull out. 

[Bruce Woodruff]

Quote from @Greg R.:

Quote from @Aaron Gordy:

House prices are sticky and certainly aren't volatile like stock prices. Homeowners who don't have to sell won't sell. As long as they have jobs then they will stay put. 

Life happens. There are a litany of reason why people are forced to sell. Losing a job is only one of the many reasons why people are forced to sell. 

 Yeah......The statement " As long as they have jobs then they will stay put." is erroneous (I'm being kind). I can think of a hundred reasons  (that I've actually seen and experienced) where a person with a job sold and moved on in desperation....

[James Hamling]

Quote from @Bruce Woodruff:

Quote from @Carlos Ptriawan:

Even in 2019, the mortgage/rent ratio and mortgage/income ratio are higher in Austin compared to San Jose,CA

I've been thinking that someone else would figure this out.....over 1/4 million people a year (net) leaving any state and taking their wealth and assets elsewhere has GOT TO have an impact on regional and national economics....

We'll see what the end results will be....

 Whooow Bruce, better be careful there because as we have been told here about a bajillion times on BP, yeah it works like that UNLESS your talking about California! No no no, that's sacrilegious! It's California, center of the universe, no, it will always be the single greatest place on earth, so there some urine here and there, urine is natural man, are you against nature, nature hater all anti-urine on the sidewalks, and alleys, parking garage hallways, lobbies, ok so pretty much all over the place BUT come on man, that's racist to say things about the homeless. 

And there not homeless in California, there residency impaired! It's like a disability, it's not there fault, they have a housing disability. 

Ok, on a serious note, the CA-Cult is obnoxious, and will freak out if you point out something like math. 

I have been a lot of places in this world, a fair number of 3rd world places as well. I rate southern California about a half notch above Ghana. They sky is freakin grey with pollution pretty much always, there is people just freaking everywhere, Mumbai levels of crowded, the homes are tiny and cost a bazillion, and the beaches are "meah" at best especially factoring in bum-dodging your way around them. I don't get it. CA is only awesome if you have never been to any place on earth that is actually decent, not even awesome just decent. 

As long as CA could keep people happy enough to not look anywhere else it was set, now, people seem to be getting a clue. 

N.CA could do ok, as long as they complete the actions and sever from the life-sucking succubus known as Southern CA. 

[Account Closed]

I just read this article from Yahoo Finance last night and this thought never came to mind. If really 3/4 of pandemic Buyers have Buyer's remorse that is a crazy high percentage. I still believe the real estate market from Summer of 2020 through May of 2022 will go down in history as a pandemic fueled artificial growth real estate market...especially for Las Vegas.

article excerpt: Many homebuyers either overpaid or made compromises on what they wanted
Nearly three-fourths of Americans who purchased homes in 2021 and 2022 have regrets, according to Anytime Estimate’s American Home Buyer Survey, which was released in September.

“Pandemic-era buyers really faced these unprecedented conditions,” says Amanda Pendleton, home trends expert at Zillow.

“This combination of rising prices, few options to choose from and that extreme time pressure meant that some buyers really ended up at a home that was less than ideal.”

The survey showed that respondents paid a median amount of $495,000 for their home — with almost a third paying over asking.

[Bruce Woodruff]

Quote from @James Hamling:

Agreed. Except ^^ you must mean NE CA. Coastal No Cal is even worse than SoCal. As a matter of fact the whole eastern side of the state is pretty normal, lotsa regular working class folks, combined with some rednecks and cowboys... :-) 

They should really split the state, for the good of everyone.

[Scott Schnabel]

RE is still a very regional market and will always be affected by supply v. demand.  Here in Ohio we have a 1.6 month supply of homes.  Balanced is a 6 month supply.  However, we are in a shift right now.  The market here has slowed significantly.

I think most people buy homes like they buy cars.  What can I afford monthly?  Payment shock has settled in over the last 6 months and will continue until interest rate changes are less volatile.

Crash?  I don't think so.  Not like 2008 anyways.

There is somewhat of a silver lining.  Part of the problem here was a lack of listings because the folks who could cash in on the sale of their home were put off by the crazy market and not feeling confident they would be able to find a home that was what they considered reasonable.  I think once the adjustment is over they'll be listing their homes.

[James Hamling]

Quote from @Account Closed:

I just read this article from Yahoo Finance last night and this thought never came to mind. If really 3/4 of pandemic Buyers have Buyer's remorse that is a crazy high percentage. I still believe the real estate market from Summer of 2020 through May of 2022 will go down in history as a pandemic fueled artificial growth real estate market...especially for Las Vegas.

article excerpt: Many homebuyers either overpaid or made compromises on what they wanted
Nearly three-fourths of Americans who purchased homes in 2021 and 2022 have regrets, according to Anytime Estimate’s American Home Buyer Survey, which was released in September.

“Pandemic-era buyers really faced these unprecedented conditions,” says Amanda Pendleton, home trends expert at Zillow.

“This combination of rising prices, few options to choose from and that extreme time pressure meant that some buyers really ended up at a home that was less than ideal.”

The survey showed that respondents paid a median amount of $495,000 for their home — with almost a third paying over asking.

 That is nothing but propaganda to effect social engineering for good renter creation. 

[Joe Villeneuve]

Quote from @Greg R.:

Quote from @Bill B.:

Thank goodness they bought a home then or they’d be homeless. Rents are up 20-30% while their payment stayed the same. Sure they could sell and walk away with a pretty healthy gain. But rent would eat that up within a year or two and then back to homeless. 

You cant count the number of people who didn’t buy for the last 2 years because they were promised a housing crash was coming. Now prices are 30% higher and interest rates have doubled. They’ll never be able to buy a home, even if prices did drop 20%. They’re pretty much screwed for life. 

The “experts” have been predicting a crash for at least 12 years. They want to make sure they get credit for predicting it this time. The news made hero’s out of those who saw it last time and everyone wants to be a hero. So they runaround yelling fire fire fire. Go ahead and search BP for housing crash coming. Your computer will probably crash with the number of results. 

Ahh, thanks Bill. I knew folks like you were still around... ones in the camp of "if you didn't buy during the bubble, you'll never be able to buy". Thanks for making your stance known. 

Also, which experts were predicting a crash in 2011-2019? I personally didn't hear a lot of talk about a crash in that timespan. The economy and the housing market was in a generally healthy place - very different from where we are now economically. 

Who you say?  Try every known expert, every wanna be expert, every Chicken Little, etc...that walked the planet (and beyond).  The real question should be "what experts didn't predict the demise of the western world" for the last <fill in the blank here> years.

[John Carbone]

Quote from @James Hamling:

Quote from @Account Closed:

I just read this article from Yahoo Finance last night and this thought never came to mind. If really 3/4 of pandemic Buyers have Buyer's remorse that is a crazy high percentage. I still believe the real estate market from Summer of 2020 through May of 2022 will go down in history as a pandemic fueled artificial growth real estate market...especially for Las Vegas.

article excerpt: Many homebuyers either overpaid or made compromises on what they wanted
Nearly three-fourths of Americans who purchased homes in 2021 and 2022 have regrets, according to Anytime Estimate’s American Home Buyer Survey, which was released in September.

“Pandemic-era buyers really faced these unprecedented conditions,” says Amanda Pendleton, home trends expert at Zillow.

“This combination of rising prices, few options to choose from and that extreme time pressure meant that some buyers really ended up at a home that was less than ideal.”

The survey showed that respondents paid a median amount of $495,000 for their home — with almost a third paying over asking.

 That is nothing but propaganda to effect social engineering for good renter creation. 

You crack me up @James Hamling

Anything that shows housing is heading for a 20 percent drop from peak, you say is “propaganda” I understand you feel invincible as a top broker at your firm, and up until now, you were able to succeed with high performance. Housing is heading for a drop that you can’t do anything about. You can’t always be “Superman” Joe 

[John Carbone]

Quote from @Joe Villeneuve:

Quote from @Greg R.:

Quote from @Bill B.:

Thank goodness they bought a home then or they’d be homeless. Rents are up 20-30% while their payment stayed the same. Sure they could sell and walk away with a pretty healthy gain. But rent would eat that up within a year or two and then back to homeless. 

You cant count the number of people who didn’t buy for the last 2 years because they were promised a housing crash was coming. Now prices are 30% higher and interest rates have doubled. They’ll never be able to buy a home, even if prices did drop 20%. They’re pretty much screwed for life. 

The “experts” have been predicting a crash for at least 12 years. They want to make sure they get credit for predicting it this time. The news made hero’s out of those who saw it last time and everyone wants to be a hero. So they runaround yelling fire fire fire. Go ahead and search BP for housing crash coming. Your computer will probably crash with the number of results. 

Ahh, thanks Bill. I knew folks like you were still around... ones in the camp of "if you didn't buy during the bubble, you'll never be able to buy". Thanks for making your stance known. 

Also, which experts were predicting a crash in 2011-2019? I personally didn't hear a lot of talk about a crash in that timespan. The economy and the housing market was in a generally healthy place - very different from where we are now economically. 

Who you say?  Try every known expert, every wanna be expert, every Chicken Little, etc...that walked the planet (and beyond).  The real question should be "what experts didn't predict the demise of the western world" for the last <fill in the blank here> years.

I don’t think the fed way saying they wanted home prices to drop between 09-19. They are saying it now. They are the only experts that matter. 

[Jay Hinrichs]

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @Account Closed:

I just read this article from Yahoo Finance last night and this thought never came to mind. If really 3/4 of pandemic Buyers have Buyer's remorse that is a crazy high percentage. I still believe the real estate market from Summer of 2020 through May of 2022 will go down in history as a pandemic fueled artificial growth real estate market...especially for Las Vegas.

article excerpt: Many homebuyers either overpaid or made compromises on what they wanted
Nearly three-fourths of Americans who purchased homes in 2021 and 2022 have regrets, according to Anytime Estimate’s American Home Buyer Survey, which was released in September.

“Pandemic-era buyers really faced these unprecedented conditions,” says Amanda Pendleton, home trends expert at Zillow.

“This combination of rising prices, few options to choose from and that extreme time pressure meant that some buyers really ended up at a home that was less than ideal.”

The survey showed that respondents paid a median amount of $495,000 for their home — with almost a third paying over asking.

 That is nothing but propaganda to effect social engineering for good renter creation. 

You crack me up @James Hamling

Anything that shows housing is heading for a 20 percent drop from peak, you say is “propaganda” I understand you feel invincible as a top broker at your firm, and up until now, you were able to succeed with high performance. Housing is heading for a drop that you can’t do anything about. You can’t always be “Superman” Joe 

 Keep in mind John there is money to be made by those who know how to make it in any market. For us personally we had a record Sept 22.. There is one constant, markets never stay the same or rarely they may flat line for a while, but they are moving either up or down.  Since this is a bunch of investors talking here and not a bunch of homeowners that do not derive their income from real estate in some manner its really just our investor idea and thoughts and speculation that is being thrown about.  I for one missed it.. I thought things would cool a lot in late 2018 to 2019 .. I even did a power point that I was sharing at events I spoke at  called the Pivot.. the bottom line to my pivot talk was to limit your exposure to max debt and be ready to pivot.  So here we 4 years later and a hell of a bull run.. but I think my Pivot presentation is finally germane :)  And because I did pivot in 2018 / 2019  we like our position in the market place today.  Based on what I am seeing in my little slice of bizz investors are still buying cash flow real estate and in certain markets rates don't move the needle as drastically as other markets and with rents up and so far very consistent numbers are working and folks are closing. The record month we had was homes that went into escrow in July August and close in Sept. 

Now be fair and balanced like Fox news our new builds are much slower than a year ago but we are still making sales and closings and up until right now without concessions and price cuts.. But given our situation of value add limited debt we have a lot of wiggle room if there is going to be sales we will get our share.. If there are no sales we can stop and hold for a year no problem.. I have talked to other small builders who where doing the normal pull every single penny out of their loans they could and right now being 80% ARV on your construction loans for sure is a risky place to be.. I closed one yesterday

were my payoff was just over 50% ARV. So first discount will be profit and if its a 20% discount then we stop building and ride it out.. And we will see labor and material come back to earth as things come to a screeching halt .. no builder is going to do this for practice. For existing homes with owner occs there are going to be the normal US flow of those that got transfered and need to sell. those that cant manage debt properly and need to sell those that die and kids inherit dont want house and will sell all those reason will keep some inventory on the market and some deals from motivated sellers.

ON the investor side the motivated seller has almost always been from Burned out Landlord syndrome this happens in all market conditions. 

[James Hamling]

Ever notice how 90%+ of the people obsessed with housing "crash", are NOT active investors?! 

Lol, and how about 50% of them pretend they are in some way but it's oh-so-obvious they are utterly clueless. 

I love it when someone who does "as much as" 1-2 deals, ever, likes to come onto such a tell me how things are. Always followed with what there gonna do "when it all crashes". Let's be honest, you'd do nothing! You'd do the nothing your doing now, just in a different environment. Because the nothing you do, it's a you thing, not a market thing. 

Deals are all over the place, constantly, they only change and are differently monetized, that's it. 

[John Carbone]

Quote from @Jay Hinrichs:

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @Account Closed:

I just read this article from Yahoo Finance last night and this thought never came to mind. If really 3/4 of pandemic Buyers have Buyer's remorse that is a crazy high percentage. I still believe the real estate market from Summer of 2020 through May of 2022 will go down in history as a pandemic fueled artificial growth real estate market...especially for Las Vegas.

article excerpt: Many homebuyers either overpaid or made compromises on what they wanted
Nearly three-fourths of Americans who purchased homes in 2021 and 2022 have regrets, according to Anytime Estimate’s American Home Buyer Survey, which was released in September.

“Pandemic-era buyers really faced these unprecedented conditions,” says Amanda Pendleton, home trends expert at Zillow.

“This combination of rising prices, few options to choose from and that extreme time pressure meant that some buyers really ended up at a home that was less than ideal.”

The survey showed that respondents paid a median amount of $495,000 for their home — with almost a third paying over asking.

 That is nothing but propaganda to effect social engineering for good renter creation. 

You crack me up @James Hamling

Anything that shows housing is heading for a 20 percent drop from peak, you say is “propaganda” I understand you feel invincible as a top broker at your firm, and up until now, you were able to succeed with high performance. Housing is heading for a drop that you can’t do anything about. You can’t always be “Superman” Joe 

 Keep in mind John there is money to be made by those who know how to make it in any market. For us personally we had a record Sept 22.. There is one constant, markets never stay the same or rarely they may flat line for a while, but they are moving either up or down.  Since this is a bunch of investors talking here and not a bunch of homeowners that do not derive their income from real estate in some manner its really just our investor idea and thoughts and speculation that is being thrown about.  I for one missed it.. I thought things would cool a lot in late 2018 to 2019 .. I even did a power point that I was sharing at events I spoke at  called the Pivot.. the bottom line to my pivot talk was to limit your exposure to max debt and be ready to pivot.  So here we 4 years later and a hell of a bull run.. but I think my Pivot presentation is finally germane :)  And because I did pivot in 2018 / 2019  we like our position in the market place today.  Based on what I am seeing in my little slice of bizz investors are still buying cash flow real estate and in certain markets rates don't move the needle as drastically as other markets and with rents up and so far very consistent numbers are working and folks are closing. The record month we had was homes that went into escrow in July August and close in Sept. 

Now be fair and balanced like Fox news our new builds are much slower than a year ago but we are still making sales and closings and up until right now without concessions and price cuts.. But given our situation of value add limited debt we have a lot of wiggle room if there is going to be sales we will get our share.. If there are no sales we can stop and hold for a year no problem.. I have talked to other small builders who where doing the normal pull every single penny out of their loans they could and right now being 80% ARV on your construction loans for sure is a risky place to be.. I closed one yesterday

were my payoff was just over 50% ARV. So first discount will be profit and if its a 20% discount then we stop building and ride it out.. And we will see labor and material come back to earth as things come to a screeching halt .. no builder is going to do this for practice. For existing homes with owner occs there are going to be the normal US flow of those that got transfered and need to sell. those that cant manage debt properly and need to sell those that die and kids inherit dont want house and will sell all those reason will keep some inventory on the market and some deals from motivated sellers.

ON the investor side the motivated seller has almost always been from Burned out Landlord syndrome this happens in all market conditions. 

I understand that there are going to be winners in any market environment. In a bull market, anyone with a pulse and credit will make money and ride the wave up. We are in a slow down period now though nationally. I did a deal last year probably at the peak of the overall market. I'm comfortable with it if the market drops up to 50%. I'm still expecting a 20% drop though because that is what the math is showing.

The wall street money that was behind a large portion of the run up during covid is no longer buying. valuations are too high and cost to borrow is too high. There are 1 year treasuries now offering 4%. While smaller corporations who are in a good position to just stop building or holding assets, the publicly traded home builders do not have that option. They have debt and shareholders, so they can not just decide to not build for a year and not sell homes. People are canceling contracts with these homebuilders at record rates right now. There is inventory now, and there will be more coming on shortly. The demand side has collapsed.

@James Hamling

Here is some real on the ground real time anecdotal information in your market. A guy I know has a home in Minneapolis that he sold 2 months ago. During inspection there were plumbing issues. The bank ordered a reappraisal after capital improvements and the appraisal came in 6 percent lower than 2 months prior on the same house. Seasonality adjustment?

[Greg R.]

Quote from @Account Closed:

I just read this article from Yahoo Finance last night and this thought never came to mind. If really 3/4 of pandemic Buyers have Buyer's remorse that is a crazy high percentage. I still believe the real estate market from Summer of 2020 through May of 2022 will go down in history as a pandemic fueled artificial growth real estate market...especially for Las Vegas.

article excerpt: Many homebuyers either overpaid or made compromises on what they wanted
Nearly three-fourths of Americans who purchased homes in 2021 and 2022 have regrets, according to Anytime Estimate’s American Home Buyer Survey, which was released in September.

“Pandemic-era buyers really faced these unprecedented conditions,” says Amanda Pendleton, home trends expert at Zillow.

“This combination of rising prices, few options to choose from and that extreme time pressure meant that some buyers really ended up at a home that was less than ideal.”

The survey showed that respondents paid a median amount of $495,000 for their home — with almost a third paying over asking.

Thanks much, good read. I think this captures the situation quite well. A lot of people who purchased at the top of the bubble did so out of fear and generally threw caution to the wind. Not surprising at all that almost 75% of them now regret it. Wait until they see prices come back down to reality - they're really going to hate it then. 

[Greg R.]

Quote from @Jay Hinrichs:

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @Account Closed:

I just read this article from Yahoo Finance last night and this thought never came to mind. If really 3/4 of pandemic Buyers have Buyer's remorse that is a crazy high percentage. I still believe the real estate market from Summer of 2020 through May of 2022 will go down in history as a pandemic fueled artificial growth real estate market...especially for Las Vegas.

article excerpt: Many homebuyers either overpaid or made compromises on what they wanted
Nearly three-fourths of Americans who purchased homes in 2021 and 2022 have regrets, according to Anytime Estimate’s American Home Buyer Survey, which was released in September.

“Pandemic-era buyers really faced these unprecedented conditions,” says Amanda Pendleton, home trends expert at Zillow.

“This combination of rising prices, few options to choose from and that extreme time pressure meant that some buyers really ended up at a home that was less than ideal.”

The survey showed that respondents paid a median amount of $495,000 for their home — with almost a third paying over asking.

 That is nothing but propaganda to effect social engineering for good renter creation. 

You crack me up @James Hamling

Anything that shows housing is heading for a 20 percent drop from peak, you say is “propaganda” I understand you feel invincible as a top broker at your firm, and up until now, you were able to succeed with high performance. Housing is heading for a drop that you can’t do anything about. You can’t always be “Superman” Joe 

 Keep in mind John there is money to be made by those who know how to make it in any market. For us personally we had a record Sept 22.. There is one constant, markets never stay the same or rarely they may flat line for a while, but they are moving either up or down.  Since this is a bunch of investors talking here and not a bunch of homeowners that do not derive their income from real estate in some manner its really just our investor idea and thoughts and speculation that is being thrown about.  I for one missed it.. I thought things would cool a lot in late 2018 to 2019 .. I even did a power point that I was sharing at events I spoke at  called the Pivot.. the bottom line to my pivot talk was to limit your exposure to max debt and be ready to pivot.  So here we 4 years later and a hell of a bull run.. but I think my Pivot presentation is finally germane :)  And because I did pivot in 2018 / 2019  we like our position in the market place today.  Based on what I am seeing in my little slice of bizz investors are still buying cash flow real estate and in certain markets rates don't move the needle as drastically as other markets and with rents up and so far very consistent numbers are working and folks are closing. The record month we had was homes that went into escrow in July August and close in Sept. 

Now be fair and balanced like Fox news our new builds are much slower than a year ago but we are still making sales and closings and up until right now without concessions and price cuts.. But given our situation of value add limited debt we have a lot of wiggle room if there is going to be sales we will get our share.. If there are no sales we can stop and hold for a year no problem.. I have talked to other small builders who where doing the normal pull every single penny out of their loans they could and right now being 80% ARV on your construction loans for sure is a risky place to be.. I closed one yesterday

were my payoff was just over 50% ARV. So first discount will be profit and if its a 20% discount then we stop building and ride it out.. And we will see labor and material come back to earth as things come to a screeching halt .. no builder is going to do this for practice. For existing homes with owner occs there are going to be the normal US flow of those that got transfered and need to sell. those that cant manage debt properly and need to sell those that die and kids inherit dont want house and will sell all those reason will keep some inventory on the market and some deals from motivated sellers.

ON the investor side the motivated seller has almost always been from Burned out Landlord syndrome this happens in all market conditions. 

Excellent advice Jay. That's exactly what I'm trying to do - adapt and make the most out of the current situation. I just listed one of my MF properties, even though prices are not what they were 6-months ago. I did this mainly because there are a lot more opportunities now than in the last 1-2 yrs and I have the ability to "upgrade" into a better/ more valuable property. Bit of a risky move, but I'm hoping it's the right move in this environment. 

[Timothy White]

@Greg Scott. Excellent piece Im in that boat Greg Keep up the sharing

[Bruce Woodruff]

Quote from @Greg R.:

If they paid cash, they'll just be a little bummed. If they got a loan recently or an ARM, they'll be a bit more than bummed......

[Carlos Ptriawan]

I have been a lot of places in this world, a fair number of 3rd world places as well. I rate southern California about a half notch above Ghana.

Hahaha, San Francisco is more like..... I don't know, maybe Nairobi LOL

It's one hell of a weird place. Two Milion boxes condo with human waste everywhere.

With the gov that's more commie than the Laos gov.   If someone steals only $900 from Walgreens? You're doing good, the police wouldn't even bother LOL.

[Carlos Ptriawan]

Interesting article about how many homes were purchased by investors. This is mostly done by larger institutions, syndicates, Wall Street. I think it was black rock who was the big one buying up subdivisions. All of the fake demand (they only bought because of free fed money) is literally gone now. They are already throwing in the towel on new purchases. Why would they own real estate at these valuations when they can get 4 percent from The fed doing nothing. In a very short period, everything went from portfolio performance to portfolio preservation. Would not be surprised once leases end to see institutions sell the single family homes to meet their margin calls with their financial backers. Since they got in at the beginning of the Covid wave they can sell for 20 percent less and it will still be a great deal to them. meanwhile, those sales will be comps, and despite John Doe’s putting their foot down and not lowering prices to sell, the market doesn’t care and will dictate. sure, you can keep your 3 percent mortgage and low payment, but you are stuck there, and there’s no equity to pull out. 

Hmmm not really....Blackrock and similar PE company is now creating a distressed-focus fund to buy cheap asset due to recessions, this includes real estate and company. I assume if the home price is going lower into 1 or 2 more sigma deviations, they will restart the purchase. Perhaps even buying companies like Opendoor and converting all their holding into rentals? it could happen.

Also based on their calculation, the rate of company default from now to 2024 would be 10%. So expect at least 5-10% of a company that doesn't generate cash flow to close the door within 24 months. But the asset company may purchase those companies as well.

Usually, during/after recession, there's also an opportunity to buy anything at-discount. It happened after dotcom 2001 bust as well.

[John Carbone]

Quote from @Carlos Ptriawan:

Interesting article about how many homes were purchased by investors. This is mostly done by larger institutions, syndicates, Wall Street. I think it was black rock who was the big one buying up subdivisions. All of the fake demand (they only bought because of free fed money) is literally gone now. They are already throwing in the towel on new purchases. Why would they own real estate at these valuations when they can get 4 percent from The fed doing nothing. In a very short period, everything went from portfolio performance to portfolio preservation. Would not be surprised once leases end to see institutions sell the single family homes to meet their margin calls with their financial backers. Since they got in at the beginning of the Covid wave they can sell for 20 percent less and it will still be a great deal to them. meanwhile, those sales will be comps, and despite John Doe’s putting their foot down and not lowering prices to sell, the market doesn’t care and will dictate. sure, you can keep your 3 percent mortgage and low payment, but you are stuck there, and there’s no equity to pull out. 

Hmmm not really....Blackrock and similar PE company is now creating a distressed-focus fund to buy cheap asset due to recessions, this includes real estate and company. I assume if the home price is going lower into 1 or 2 more sigma deviations, they will restart the purchase. Perhaps even buying companies like Opendoor and converting all their holding into rentals? it could happen.

Also based on their calculation, the rate of company default from now to 2024 would be 10%. So expect at least 5-10% of a company that doesn't generate cash flow to close the door within 24 months. But the asset company may purchase those companies as well.

Usually, during/after recession, there's also an opportunity to buy anything at-discount. It happened after dotcom 2001 bust as well.

Seems like they just stopped buying in a lot of markets. they are waiting for prices to drop to get back in when valuations make sense. 

 https://www.google.com/amp/s/f...

[Carlos Ptriawan]

Quote from @Bruce Woodruff:

Quote from @Carlos Ptriawan:

Even in 2019, the mortgage/rent ratio and mortgage/income ratio are higher in Austin compared to San Jose,CA

I've been thinking that someone else would figure this out.....over 1/4 million people a year (net) leaving any state and taking their wealth and assets elsewhere has GOT TO have an impact on regional and national economics....

We'll see what the end results will be....

 They're mostly CA retirees, think the scenario is like this. In their 30 they started working in CA, and purchased 100k-300k houses in the 1990s. Suddenly out of nowhere during 2019-2021, they realized in their 60 the house price is $1-$2million here.  And here we go"Let's move somewhere else as I don't have income and CA is expensive". Out of nowhere suddenly every retiree has $1-$1.5 million in their bank account. Let's move to Nashville they said, the realtor is selling for $400k only, "what a bargain, I can't find this mansion in bay area for 400k". The retiree then purchased the home for $500k and had an additional $500k for retirement. Then that price is adjusting the price for the neighborhood. 

[Joe Villeneuve]

Quote from @Jay Hinrichs:

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @Account Closed:

I just read this article from Yahoo Finance last night and this thought never came to mind. If really 3/4 of pandemic Buyers have Buyer's remorse that is a crazy high percentage. I still believe the real estate market from Summer of 2020 through May of 2022 will go down in history as a pandemic fueled artificial growth real estate market...especially for Las Vegas.

article excerpt: Many homebuyers either overpaid or made compromises on what they wanted
Nearly three-fourths of Americans who purchased homes in 2021 and 2022 have regrets, according to Anytime Estimate’s American Home Buyer Survey, which was released in September.

“Pandemic-era buyers really faced these unprecedented conditions,” says Amanda Pendleton, home trends expert at Zillow.

“This combination of rising prices, few options to choose from and that extreme time pressure meant that some buyers really ended up at a home that was less than ideal.”

The survey showed that respondents paid a median amount of $495,000 for their home — with almost a third paying over asking.

 That is nothing but propaganda to effect social engineering for good renter creation. 

You crack me up @James Hamling

Anything that shows housing is heading for a 20 percent drop from peak, you say is “propaganda” I understand you feel invincible as a top broker at your firm, and up until now, you were able to succeed with high performance. Housing is heading for a drop that you can’t do anything about. You can’t always be “Superman” Joe 

 Keep in mind John there is money to be made by those who know how to make it in any market. For us personally we had a record Sept 22.. There is one constant, markets never stay the same or rarely they may flat line for a while, but they are moving either up or down.  Since this is a bunch of investors talking here and not a bunch of homeowners that do not derive their income from real estate in some manner its really just our investor idea and thoughts and speculation that is being thrown about.  I for one missed it.. I thought things would cool a lot in late 2018 to 2019 .. I even did a power point that I was sharing at events I spoke at  called the Pivot.. the bottom line to my pivot talk was to limit your exposure to max debt and be ready to pivot.  So here we 4 years later and a hell of a bull run.. but I think my Pivot presentation is finally germane :)  And because I did pivot in 2018 / 2019  we like our position in the market place today.  Based on what I am seeing in my little slice of bizz investors are still buying cash flow real estate and in certain markets rates don't move the needle as drastically as other markets and with rents up and so far very consistent numbers are working and folks are closing. The record month we had was homes that went into escrow in July August and close in Sept. 

Now be fair and balanced like Fox news our new builds are much slower than a year ago but we are still making sales and closings and up until right now without concessions and price cuts.. But given our situation of value add limited debt we have a lot of wiggle room if there is going to be sales we will get our share.. If there are no sales we can stop and hold for a year no problem.. I have talked to other small builders who where doing the normal pull every single penny out of their loans they could and right now being 80% ARV on your construction loans for sure is a risky place to be.. I closed one yesterday

were my payoff was just over 50% ARV. So first discount will be profit and if its a 20% discount then we stop building and ride it out.. And we will see labor and material come back to earth as things come to a screeching halt .. no builder is going to do this for practice. For existing homes with owner occs there are going to be the normal US flow of those that got transfered and need to sell. those that cant manage debt properly and need to sell those that die and kids inherit dont want house and will sell all those reason will keep some inventory on the market and some deals from motivated sellers.

ON the investor side the motivated seller has almost always been from Burned out Landlord syndrome this happens in all market conditions. 

150% correct...as usual.

[Carlos Ptriawan]

Quote from @John Carbone:Seems like they just stopped buying in a lot of markets. they are waiting for prices to drop to get back in when valuations make sense. 

 https://www.google.com/amp/s/f...

Yea they are waiting for the perfect time to buy. Every fund out there is waiting when the Fed will do the "pivot".  Valuation is following the pivot.

Some of them predicted the stock market to bottom mid-next year.

I think the faster the home price reduction/pullback/crash/ happened, it would be better as it will put pressure on the Fed. 

[John Carbone]

Quote from @Carlos Ptriawan:

Quote from @John Carbone:Seems like they just stopped buying in a lot of markets. they are waiting for prices to drop to get back in when valuations make sense. 

 https://www.google.com/amp/s/f...

Yea they are waiting for the perfect time to buy. Every fund out there is waiting when the Fed will do the "pivot".  Valuation is following the pivot.

Some of them predicted the stock market to bottom mid-next year.

I think the faster the home price reduction/pullback/crash/ happened, it would be better as it will put pressure on the Fed. 

If they pivot by year end, housing values won’t drop materially. A house transaction takes a few months to complete and it takes longer to reach proper market pricing.  But Powell said he wants lower home values, I used to think the fed will pivot early because the damage they will do, but they are single mandate inflation. I really think they will let spx go below 3000 and housing to go below Covid levels before they panic. Unless we have a major liquidity crisis like the UK had with a pension fund or a bank then they will have their “excuse” to pivot while still acting “tough”. The fed works with other central banks, they are going to monitor the boe sorcery and see if they can add it to their own arsenal.